Business growth stimulants research has revealed that technological advancements, platform-based alternative models and reverse factoring solutions hold new possibilities for micro and small medium enterprises (MSMEs) in Nigeria and other developing markets to bridge finance gap, as well as scale up growth and expansion.
According to the study conducted by Stears – a macro insights and analytics provider that enables quick, accurate decisions for both financial and operational opportunities in partnership with digital supply chain finance platform, Fiducia, by leveraging disruptive financing options, MSMEs in developing countries can overcome current finance gap estimated by the International Finance Corporation (IFC) at $5.2trn as funding barriers constitute a key challenge that inhibits MSMEs growth and capacity to scale.
The special report titled, ‘Platform-Enabled Alternative Supply-Chain Finance: The Case for Factoring and Reverse Factoring’, highlighted the pressing challenges faced by MSMEs in accessing financing in Nigeria, and the limitations of traditional supply chain financing solutions, was presented on Monday, September 25, 2023, in Lagos.
In the report presented by Stears’ duo, Michael Famoroti, Co-founder & Head of Intelligence and Adaobi Oni-Egboma, Senior Associate, Digital Regulations. The study pointed out that, “despite their significance to the global economy, MSMEs globally face significant challenges in accessing the financing that they need, constraining their survival and growth prospects. According to the International Finance Corporation, the finance gap in developing economies is $5.2 trillion.
Micro Small and Medium Enterprises (MSMEs) constitute about 90% of businesses and more than 50 per cent of employment worldwide; formal MSMEs contribute to 40 per cent of GDP in emerging economies. Even in more advanced economies, MSMEs are significant employers, with businesses employing fewer than 50 individuals contributing 66 per cent of total employment in G-20 economies.
To bridge the supply chain funding gap, disruptive financing options have emerged, driven by technology and offering benefits such as eliminating credit barriers and leveraging alternative data to expand MSME access to finance.
Platform-enabled factoring and reverse factoring offer a lifeline here, providing efficient methods of managing accounts receivables and payables, ensuring financial stability and enabling businesses to focus on service delivery. These solutions foster seamless and low-cost transactions, strengthening relationships in the supply chain finance ecosystem,” the report stated.